October 09, 2014 | Industry Insights

No Increase for Forwarder, NVO Bonds

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No Increase for Forwarder, NVO Bonds

The Federal Maritime Commission’s proposed revisions to ocean transportation intermediary (OTI) rules have been amended to eliminate some mandates that were unpopular with freight forwarders and OTIs.

Proposed bond increases, which met with industry pushback, have been eliminated from the FMC’s newest version of the guidelines. The June 2013 original proposal included increases in bonds: for freight forwarders—to $75,000, up from $25,000; for licensed non-vessel-operating common carriers (NVOCCs)—to $100,000, up from $75,000; and for registered foreign-based NVOCCs—to $200,000, up from $150,000. A new OTI proposal containing no bond-requirement increases is expected to be released in the Federal Register soon, at which time freight forwarders, NVOCCs and other industry players are invited to comment on the plans.

Other proposed requirements regarding license renewals and a tiered-priority system for payment on bonds and insurance have also been revised or eliminated. The FMC had suggested requiring OTIs to renew licenses every two years, but that has been altered in the upcoming version to three-year renewal terms. Additionally, the FMC proposed in June 2013 to establish a three-tier priority system for payments on intermediaries’ bonds and insurance, but opponents complained about red tape, costs, and the FMC’s scattershot approach to solving problems that are primarily caused by certain bad players in the personal household goods overseas shipping sector—an area separate from OTIs’ operational niche.

In announcing the upcoming revisions, FMC Commissioner William Doyle told a customs brokers and forwarders conference, “I heard you.” He said the newly revised rule proposal “looks substantially different.” Doyle spoke at the Washington, D.C., National Custom Brokers and Forwarders Association of America Government Affairs Conference, where he also noted that he has spent the last year meeting with representatives of the NCBFAA, Transportation and Intermediaries Association, UPS, and Expeditors International to hear their comments on the agency’s proposed OTI rule changes.

FMC Chairman Mario Cordero, however, told the Journal of Commerce in June this year that, though he had heard industry complaints on the FMCs proposed rules, he believes changes to the licensing system are necessary. He indicated that the agency would try to amend the regulations without creating burdens on the sector. An FMC audit found that between 14.6% and 24.4% of OTIs in 2012 failed to meet one of four requirements—change of business address, resignation or retirement of qualified officials, surety bonding increases, or adoption of a new trade name—despite FMC annual requests for informational updates.

Roanoke Trade is the leading provider of insurance and surety solutions for transportation and logistics providers. For more information about our products and services, contact us at 1-800-ROANOKE.

Source: Journal of Commerce

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